SEC has approved the ProShares Bitcoin Strategy ETF but only the trading of the fiat futures. ProShares was hoping to begin trading CME fiat Bitcoin futures in the “Canadian Exchange Traded Funds and Other Pooled Investment Vehicles”
SEC had not formally given its approval as of last Friday. However, according to the law, ProShares could still go ahead if there had been no disapproval after 75 days had elapsed. The day to launch was this Monday, October 18, 2021.
ProShares Cannot Invest in Canadian ETFs or any other pooled investments
Just before the launch date, SEC unexpectedly came out with its instructions for the launch. ProShares can proceed but it should note that only investment in fiat futures, as well as Treasury bills, is permitted. Canadian ETFs or any other pooled investments are out of the question.
ProShares fiat Bitcoin futures will pay a maintenance fee of 0.95% a year. The fee may potentially translate to additional expenses for BITO holders when trading begins.
Additionally, the Bitcoin ETF will be invested in monthly futures contracts, which will expire on every last Friday of the month. The expiration period may end up being costly to holders as per the ‘contago’ relationship. Traders should note that futures contracts with a longer term to expiration usually have a higher price compared to those with a shorter term to expiration.
The contago relationship will consequently push funds to sell the expiring contract at a relatively lower price and buy a longer-dated contract at a relatively higher price.
Will the Listing Attract or Push Away Investors?
Considering this fact, it will be more beneficial for an investor to hold the actual Bitcoin fund compared to the Bitcoin futures ETFs that SEC is restricting the trading too.
It is hard to predict the direction of the ProShares Bitcoin Strategy ETF. The above analysis may discourage investors. Alternatively, others may see it as a remarkable milestone for the leading crypto and want to hop on it before it is too late. All in all, time will tell.
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